The familiar $250,000 FDIC insurance limit is not a separate guarantee for every bank account. It applies per depositor, per insured bank, for each account ownership category. That difference matters when a household keeps savings, checking accounts and certificates of deposit at the same bank.
The Federal Deposit Insurance Corporation says it adds together deposits held in the same ownership category at the same insured bank, even when the money is split among different account types.
For example, one person with $180,000 in a single-owner savings account and $90,000 in a single-owner certificate of deposit at the same insured bank, with no beneficiaries on either account, has $270,000 in that category. The standard $250,000 limit would leave $20,000 above the limit, before accounting for any additional accrued interest.
Opening a second account at that bank does not by itself create another $250,000 of protection. Deposits at a different FDIC-insured bank have their own limit. Different ownership categories at the same bank may also receive separate coverage when the requirements are met.
Those categories include single-owner accounts, qualifying joint accounts, certain retirement accounts and trust accounts. Their rules differ, so a household should not assume that adding a name or beneficiary automatically produces a particular amount of coverage.
The protection covers deposits such as checking accounts, savings accounts, money market deposit accounts and CDs at insured banks. It does not cover stocks, bonds, mutual funds, crypto assets, annuities or life insurance policies, even when an investment is sold through a bank.
A money market deposit account is therefore not the same thing as a money market mutual fund. The account can be an insured deposit; the mutual fund is an investment that the FDIC does not insure.
Deposit insurance also covers a specific event: the failure of an insured bank. It is not general insurance against theft, fraud, investment losses or a company’s app going out of business. Other laws may apply to those situations, but they are not the same protection.
That distinction is important for people who keep money through a financial-technology company rather than directly at a bank. The FDIC says nonbank companies are never themselves FDIC-insured.
A nonbank may place customer money at an insured bank, where the money may qualify for what is called pass-through deposit insurance. The arrangement must meet requirements, including records identifying who owns the funds and how much belongs to each person. A statement that an app works with an insured bank is not enough on its own to establish coverage.
The FDIC does not insure against the bankruptcy of the nonbank company. Consumers should identify the bank that is supposed to hold their money and read the account disclosures, including what happens before funds reach that bank.
Coverage is automatic for eligible deposits at insured banks; a customer does not need to buy a separate FDIC policy. The agency directs consumers to its BankFind search to check an institution and its Electronic Deposit Insurance Estimator to work through coverage for their own account ownership arrangements.
Sources: the FDIC’s Deposit Insurance at a Glance, coverage guide and guidance on third-party financial apps. These explain existing protections, not a newly announced increase in the insurance limit.
JBizNews Desk | Washington
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